MMI Investments, also known as Millbrook Capital Management Company, is seeking a sale of portfolio company Checkpoint Systems Inc., Reuters reported. New York-based hedge fund MMI holds a 4.9% stake in Checkpoint, which makes products designed to curtail shoplifting.
(Reuters) – One of Checkpoint Systems Inc’s (CKP.N) largest shareholders is seeking a sale of the company, according to a letter the shareholder, MMI Investments LP, sent to the company.
MMI Investments, also known as Millbrook Capital Management Company LLC, holds a 4.9 percent stake in Checkpoint, which makes a variety of products designed to curtail shoplifting.
The New York-based hedge fund said it tried to make its recommendations to the company’s board and its chief executive Rob van der Merwe since June, but had been rebuffed.
“We have recommended that Checkpoint hire an investment banker to explore strategic alternatives, which the board summarily dismissed. We have attempted to connect Checkpoint with those who are highly qualified and potentially interested in buying the company, to no avail,” Jerome Lande, partner of MMI Investments wrote in the letter obtained by Reuters.
The letter, dated August 10, also mentioned MMI’s recent request to have a representative appointed to Checkpoint’s nine-member board, an option that was also rejected.
MMI Investments plans to file a schedule 13-D with the Securities and Exchange Commission, indicating that it has accumulated over 5 percent stake in the company.
As of Tuesday’s close, Checkpoint had a market capitalization of $576 million. The shares closed up almost 10 percent to $14.37.
Philadelphia, PA-based Checkpoint has over the last three decades built a suite of products that primarily focus on reducing “shrink,” or merchandise lost through employee theft, shoplifting, vendor theft and paperwork errors, for retailers ranging from supermarkets to apparel.
MMI Investments said Checkpoint’s shares have declined every year for the last eight years and has underperformed the S&P 500 as well as small cap indices, including the Russell 2000.
“Our analysis suggests that a transaction could yield a stock price in the low-to-mid $20s, assuming acquisition by a financial sponsor at 7.5 to 8.5 times the midpoint of the company’s 2011 EBITDA guidance, and potentially well above that with a strategic acquirer,” Lande said in the letter.
MMI Investments recently won its several month shareholder battle against EMS Technologies (ELMG.O). It requested that EMS hire an independent special committee to run its sale process and nominated a slate of nominees to the company’s board of directors.
EMS, which provides wireless connectivity solutions over satellite and terrestrial networks, eventually sold itself in June to Honeywell International Inc (HON.N) for $506 million in cash.